Livinglies Opens Up New Front Against Enforcement of Securitized Student Loans

As we progress toward success on the foreclosure front (yes, I believe it is coming) my return to representing clients directly in Florida in addition to my expert witness testimony in other states, has brought me face to face with a torrent of inquiries about student loans. There are over $1  trillion in student loans and they are starting to drag on the economy as the bankers laugh all the way to, well, the bank.

Let’s start at the beginning. There are two types of student loans and it appears as though only one of them is subject to claims of securitization. In “private Student Loans” it works pretty much the same way as the mortgage meltdown loans. Students who completely lack any literacy or sophistication and who rely upon the “loan officer” of a chartered bank are encouraged to borrow more than they need and more than they are likely to be able to pay back. The sales lines are virtually the same script as what was used on hapless “borrowers” in the mortgage meltdown, tailored to what appears to be a different situation. The origination “officer” convinces the student that in order to study, live and play they will need more money than what the student asked for.

The private bank, which is the originator, knows that they are the naked nominee of an undisclosed lender just like the mortgage loans. The actual source of funds comes from the sale of student-backed government guaranteed bonds purchased by fund managers that are desperately looking for higher yields than the market generally allows. Here is a tip: in any scam, the yield promised to investors is always higher than market and the viability of the bond depends completely upon the sale of more bonds — i.e., a Ponzi scheme. So if you see an advertisement for 12% yield, you can be certain that a Ponzi scheme is in play and you are most likely going to lose all your money. Don’t buy it. If it was real, then far more sophisticated investors and managers would have already snapped it up. There wouldn’t be anything left for small investors like you.

Back to student loans. The “lending bank” which is actually a naked nominee of an undisclosed lender (i.e., a group of investors) approves the loan and the borrower student doesn’t know it but his interest rate may go as high as 18% after he or she graduates, making the loan impossible to pay unless the student hits a flow of income in business or investment that by chance makes the student loan look like chump change. 99% of the student loans produce hardship of some sort or another because the principal was too high (like mortgages) and the interest rate changed to an unpayable amount.

So far in our limited amount of research, the student loan infrastructure looks eerily like the mortgage meltdown. The actual money comes in from a wire transfer from a “custodial account” managed by the investment banker that created and sold the student loan-backed bonds to the investors. The investors thought they were investing in a special purpose vehicle like a REMIC (used in real estate loans) or special purpose vehicle since the bonds are clearly issued by the SPV (trust).

Besides getting high ratings from the ratings companies, the bonds are advertised as insured, hedged and guaranteed by the Federal government. So from the investor’s point of view, just like the in the mortgage mess, there appears to be no way to lose money. Indeed, so far, they are right. The Federal guarantee comes with a caveat — the loan may not be discharged in bankruptcy.

In Court, later, the student is going to be caught in the cross fire of the same rhetoric that got the foreclosure mess started in the wrong direction: “you took the loan, you signed the papers, and you admit the default.” Therefore, there appears to be no way out….. except….I have another idea.

The Federal guarantee is really what is being purchased by the investors and they are the actual lenders, which excludes them from the class of lenders authorized to receive a guarantee. What that means is that the investors are NOT entitled to receive a guarantee or payment on the guarantee. It also means, I would argue, that if there is no Federal guarantee, there is no exemption from bankruptcy discharge.

In plain English if a chartered bank did not take in the loan as a loan receivable and instead converted it into a bond receivable to investors, then the bank took no risk at all, and there was no reason to provide a guarantee of a risk of loss that did not exist. The misrepresentation of the financial community has dumped hundreds of billions of “losses” onto the federal government when those losses were actually covered by various risk avoidance vehicles like insurance and credit default swaps.

So here is how it is working now, from what I can determine at this time: the bank stands in as naked nominee in the loan with no assumption of any risk and therefore nothing to guarantee. The bank is renting out its name to grab onto the federal guarantee because it is not apparent that investors are funding the loan and that insurance and credit de fault swaps are not only protecting against the loss, but providing the same opportunity for Wall Street to create tier 2 yield spread premiums and multiple payments of the entire principal — payable to Wall Street investment banks who never had a nickle in the game. The proceeds of insurance and credit default swaps are neither reported nor paid to the investors — just like the mortgage mess.

The predatory loan infrastructure is virtually identical to the one seen in the mortgage market. Teaser rates are provided with no interest or very low interest payments while the student is in school and then, without any governance from regulators, the interest rate starts to rise attaining great heights.

In numbers it looks like this: the student borrows $50,000. While in school there is no interest payment but he interest is accruing and he or she still owes it which is the same as a negative amortization loan. When the student gets out of school the interest rate shoots up to 8%, for example, applied against a new balance consisting of the original amount borrowed and the unpaid interest. So now the student is tuck with sticker shock. He or she thought they were borrowing $50,000 but now they find after four years of school that they owe $66,000 at 8% interest, which is about $5,000 per year without repayment of principal. The interest rate could climb to as high as 16% which would make the new loan $90,000.

Meanwhile the bank simply reports the new loan to the aggregator who authorizes the investment bankers’ “Custodial fund” to release the money for funding of the loan. Instead of disclosing the real lender, and putting the name of the real lender on the note the investment bank is using the illusion of a chartered bank making the loan and for a window of time, claiming to own the loan through a series of non-existent transactions that will be documented on demand to show assignments, endorsements, and other indicia of sale or transfer of the loan. The pile of transfer of documents lends the illusion of credibility to the assumption that there was an actual monetary transaction between the student and the bank who originated the loan but who was merely performing a fee-based service, illegally lending their name to private investors to make it appear as though the transaction was a bank loan.

The documents are fabricated to show that the investment banker owns the loans and the investment banker then goes and gets that insurance and those credit default swaps the supposedly going to protect the investor from risk of loss on top of the government guarantee. Once again we see loans pushed that reset with much higher principal and much higher interest than the average graduate could ever pay.

Despite the Federal Truth in Lending Act and other deceptive lending statutes, regulations and rules on the federal and state level, this “lending” of the chartered bank’s name to the transaction has consistently slipped through avoiding regulations and asserting guarantees, the conditions for which do not apply. Again, the same thing as the mortgages.

In my opinion the student loans in bankruptcy are dischargeable if you you deny that the party suing you or seeking collection did not receive and could not receive the federal guarantee which means the exemption from discharge does not apply. In my opinion the principal claimed is both wrong and unconscionable and may be challenged as a predatory loan. I believe that student loans will soon be treated as any other non-secured loan and subject to discharge or reorganization under chapters 7, 11 or 13. I believe that the amount demanded is probably improper because of the existence of mitigation of damages achieved through insurance and credit default swaps, both of which were promised to the investors and neither of which was reported or paid to investors.

If the  mitigation payments had been made to the investors then the bond receivable would have been reduced, thus reducing the loan receivable underlying the bond. Hence it is my opinion that both the principal and the interest, penalties and other fees and expenses for a loan in default do not conform to the deal made between the lenders (investors) and the borrower.

LAWYERS TAKE NOTE: The insurance payments and proceeds of credit default swaps were, as far we can tell, ALWAYS accompanied by a waiver of subrogation or contribution from the borrower.

STUDENTS TAKE NOTE: This blog is for general infomration putposes and may or may not apply to your case. Before you decide ro act on anything resulting from reading this blog, learn more about student loans and consult with a competent attorney licensed in the jurisdiction in which you are located, or where the transaction occurred or where venue is “Agreed”in the loan documents, although the loan documents might be avoided entirely if material violations of TILA and other statutes and rules can be alleged and proven. In my opinion, if you try this on your own, you are most likely to fail and make bad law for the rest of students who wish to modify or extinguish their loans.

see http://online.wsj.com/article/SB10001424127887323293704578334542910674174.html?mod=WSJ_hp_LEFTWhatsNewsCollection

and

Student Loan Bubble So Big It’s Trumping Credit Cards as a Spending Driver
http://www.nakedcapitalism.com/2013/03/student-loan-bubble-so-big-its-trumping-credit-cards-as-a-spending-driver.html

35 Responses

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  2. Interesting how christine is like a ravenous wolf whenever I mention China…I bet she doesn’t like Donald Trump much either.

  3. Ron Paul already blew the whistle on the sequester ….it’s all an illusion …

  4. I meant that in a sarcastic way christine…..I know they are demons who hide from the light.

  5. FBI Warns Sequestration Will Hamper All Their Hard-Hitting Wall Street Investigations

    Posted: 03/04/2013 4:40 pm EST | Updated: 03/05/2013 12:14 am EST

    http://www.huffingtonpost.com/2013/03/04/fbi-sequestration-wall-street_n_2807338.html?utm_hp_ref=tw

    Good one! I’ll believe in investigations when I see one banker jailed.

  6. sunning themselves in San Tropei…?

    Saint-Tropez, moron. You just proved my point.

  7. Ha ha Christine…I know precisely what I am talking about, that is what bugs you. Can’t place them on a map…..? LMAO…..they are all hiding in remote locations, probably sunning themselves in San Tropei while those of us who “get it”, struggle to take back what they stole and hijacked from US… I stand by my statements…..Esp….do not trust Russia or China or any foreigners claiming we owe them something. No we do not…however, these crooks owe us GAZILLIONS …!

  8. What a moron…! Dropping names she has no idea about, concerning countries she’s unable to place on a map, relative to historical facts and events she’s heard of only thanks to the Alex Jones of this world. Hey, moron: didacticism is only another twist in your seriously deranged mind. It never was synonymous with using your brain to… think, as in analyze, comprehend, etc.

    Oh well. It’s hopeless.

  9. I forgot to add onne important prophecy was ….. do not trust China and Russia.

  10. notmynpv….If you look back in history, these crooks hijack everything. The Spanish black nobility, via the Jesuits have been running the Vatican for over 500 years according to experts. They wear many clever disguises. The Italian’s are their enforcement arm and so are the Chinese and the Russians. King Juan Carlos of Spain is said to be the director of the Vatican, the grey pope. It is the Aldobrandini and the Borjia bloodlines, the Orsinis at the top. There are other family names that connect to this bloodlines but the thirteenth bloodline is the top echelon of evil. One of the Rockefeller’s married into the Aldobrandini bloodline. They are all control freaks who now have even more power because of modern technology. Modern Technology gives them all the power to do their evil works from behind the scenes, that is just how they like it…..secret and deceptive. That is how they operate to defraud and rob us.

    Being a believer in prophecy, I believe they have gone way too far in their quest to be God. They believe the holy grail is Complete Control. They missed the mark .. The Creator is not about control but free will. That is why no one wants to be controlled by control freaks. Free will is our gift from the Creator and that is why no matter what they call themselves, control freaks never win.

    They want their cake and eat it to, that is why they have dumbed down the minds and free will of the masses by making us believe we have limited choices and limits, that we have no control of ourselves and our destiny’s. Those limited choices and limits are all in our minds.

    We need to realize, technology is being used by these evil doers for much more nefarious than what it appears.

  11. This is an evil cult of liars and thieves. They are the great deceivers of mankind. I believe the truth is being shown to us because there is a greater good that will overcome all of this,,our Creator and the U.S. CONSTITUTION.

  12. To blame religion or politics for any of this infiltration is a cop out. Evil always wants to control everything and finds its way in and always takes on new forms to hide itself. Everyone seems to have an agenda these days. Even the so called truthful websites very skillfully weave lies with truth. They work hard to tell us mostly the truth to make us believe a few big lies or even one big lie. They really don’t want us to believe we have a Constitution, however, if that were the case, we would not be exercising these rights today.

  13. Jim, okay but not in fed juris where art 3 butts heads with rule 17 and jurisdictional issues. One in possession of a bearer notes may be entitled to enforce it pursuant to certain provisions of art 3 (although the jury really isn’t in as to whether or not these particular notes are transferred by art 3 negotiation at all – they are more likely subject to a sale and assignment agreement., which imo is what they try rather belatedly in all the “MERS” assignments. lay opinions – not being a lawyer, that’s all I’ve got! I appreciate your feedback, btw.

  14. They hide behind religion, politics, law enforcement, the military, the judiciary, education, the medical establishment, the media, money and investing.

  15. The Papal Nobility bloodlines of old going back to the Ptolemaic dynasty era of Egypt are who control this global conspiracy. They are the Templars of today who control from behind the scenes via the Vatican and the Governments.
    .

  16. The real omega point of control over this global conspiracy……
    http://wesdancin.wordpress.com/2011/08/21/world-control/

  17. The Knights Templar International Order: http://www.osmth.org/modern-order

  18. The Vatican is run from behind the scenes by very different personages than what it appears. The same thing with the Governments and their agencies. The Knights have severely subverted everything by infiltration and investing.

  19. I get that notmynpv however, they used the Pope and the Catholic Church. They use every one. Not to say the Pope was not a member of one or many secret societies, they all are.The resignation of the Pope really means nothing. There is a worse one waiting in the wings. The freemasons are tools as well for the hierarchy, the largesse family of 8 who claim bloodline to both Christ and Satan and have infiltrated America and are AKA the Knights Templars wear many disguises.Communism disguises itself as something good.
    http://www.cuttingedge.org/News/n1857.cfm

  20. Stripes, be careful. Don’t think for a moment that the tools are limited to a couple trowels, a level and a radius. KT only modernized the exchange of goods for coin, the pope was pulling the strings, and the puppets simply came to life.

  21. Johngault

    Not sure if i understood your post but the Horvath ct (virginia fed 4th cir) held bare holder including a thief could enforce the note

  22. They are loyal to no one. Use and abuse is all they do.

  23. This is all the work of the Knight’s Templars. They use the banks and Wall Street, the Governments to do their dirty work. They wear many disguises. They are one big family called the Bronwens.

  24. People have absolutely no idea of the extent of theft, debauchery, corruption and the likes within government and the military. it is astounding but Kay Griggs has the documents and the pictures to back it up. She went public a year ago or so, after years of being tormented by the military for speaking up. Since then, many other military wives have started talking. it is simply unbelievable!

    The good news is… it no longer is hidden. The truth shall make everybody free and a few additional heads will roll soon. Watch for military resignations en masse soon. if i recall, it’s already started…

  25. Iwantmynpv,

    If you’re asking about Anonymous’ release of info, you need to go to Hang the Bankers. LL won’t allow me to post the link.

  26. A people can value nothing greater than their own freedom and dignity, and must defend these with their last drop of blood. There is no duty as sacred and no higher law. The pernicious belief that one can secure these without conflict and by avoiding danger is both false and poisonous. Danger can only be met with virile courage joined with a calm and firm resolve and a clear conscience. These virtues alone form the true leaders of a people and bring into being the martial forces that can win the deepest and cherished dreams of humanity.
    – Karl von Clausewitz, 1831

  27. from an old blog of mine (therein PIG stands for Guy In Possession,
    backwards):

    The Confluence of Article 3 Enforcement and FRCP 17

    Rule 17 is a threshold rule. A party unaggrieved – being aggrieved
    IS the bar – may not enter the court, may not invoke its jurisdiction
    and seek resolution of someone’s else’s problem. That’s why even if a
    thief may somehow enforce a bearer note, he may not do so in federal
    jurisdiction, having suffered no injury. A right to enforcement,
    here allegedly under Art 3, does not make that party aggrieved. Banksters will say yeah it does if their right to enforce can’t be adjudicated. Well, yes, it can. They just need to join the rpii.
    The rpii is the party who has the beneficial interest in the note, the
    guy who’s getting the relief by its enforcement and so is the guy who’s
    issue is being litigated. He’s the guy who is aggrieved and will suffer
    (and is suffering from) the loss/injury by non-payment of the note.
    When art 3 finds a PIG entitled to enforce a note (NOT these, other
    notes – later on that one), the PIG CAN go after the note maker. BUT if
    the PIG wants a court to adjudicate the matter, wants to invoke the
    jurisdiction of a court, the PIG must join the rpii: that’s where rule 17
    comes in – in a court.
    When the Pig is after the maker on his own, outside the jurisdiction of
    the court, he isn’t subject to rule 17.
    Even if possession of a bearer note leads a court, outside non-recourse states (later or that one – non-recourse states), to a conclusion that the possessor may enforce, it still must
    join the rpii in a court of federal jurisdiction.
    Even if a coll instrument followed a note, which I swear it doesn’t,
    it wouldn’t follow mere possession (holder) or give the possessor a
    right to an assgt. If a collateral instrument follows anything, it’s
    the note’s ownership, which is not evidenced by mere possession.
    Failure to join the real party in interest is an affirmative
    defense and as I recall, those have to be made in the first responsive
    pleading to a bankster’s claim or they are waived as a matter of law. At
    any rate, I don’t see it used much anymore, although I think
    it should be. It sort of came and went, maybe for a misunderstanding promoted by banksters that one in possession of a bearer note is the owner / aggrieved party, is necessarily the real party in interest when ithey’re not.
    If anyone disagrees with my opinions here, I’d be interested in the arguments.
    lay opinions – ask a lawyer or 10

  28. A year or so ago, I mentioned a bk involving credit card debt and its alleged assignment to the claimant and the debtor’s arguments against
    that party’s rights for lack of evidence of an interest. It has some good arguments imo (debtor’s attorney’s). It’s NV bk 04-21029. The claimant was Sherman Acquisitions, which I’m mentioning so one needn’t scour (and pay to do so) the entire docket. The debtor was Thibodeaux.

  29. You all seem bewildered that student loans are also securitized. Breaking news… so are auto loans, credit card receipts, home repair loans, personal loans – commercial debt obligations.

    Where did Anon post all this stuff, and why can’t a link be posted?

  30. Remember, the actual purpose of these Ponzi schemes is to make you into a debt slave for life. The banksters do it all over the world, and they have done it before on other parts of the world before the U.S.

  31. Read “Hang the bankers today” about the ton of information released on the bankers by Anonymous today in addition to what was released last week.

    We’re gonna know everything…

    LL won’t let me post the actual article. You need to google it.

  32. http://www.spiegel.de/international/europe/a-growing-vatican-bank-scandal-threatens-catholic-church-image-a-842140-2.html

    Transparency vs. Money Laundering: Catholic Church Fears Growing Vatican Bank Scandal

    By Andreas Wassermann and Peter Wensierski | July 02, 2012 – 05:27 PM

    [Part 1] Catholic Church Fears Growing Vatican Bank Scandal
    A new scandal threatens to engulf the Catholic Church and this time the focus is money. Senior Vatican officials are battling over the future of the Vatican bank. While some would like total transparency, dubious transactions from the past and present could harm the Church’s image.

  33. HOORAY!!! Thank you Mr. Garfield. I am taking my student loan servicer (A.E.S.) to court as soon as my IFP is approved which I am sending on the 12th of this month. Now my argument on this is not securitization but rather that the pretender lender never payed for the note and I thank Mr. Garfield for showing me this aspect. I will keep you all up to date on my progress on this. ~~~ Cheers

    — RANDY

  34. One of the problems with the student loan debt is, the students in many cases had grandparent or parent co-sign and use their homes as collateral. Though securitization never occurred, it is another mind game and people fear losing their homes over student loan debt. TBTF are also taking late student loan money right out of the students income tax returns. That is a really greedy and disgusting practice that should be illegal. These students are not finding careers in fields they went to school for and are not earning much money. They are not defaulting because they want to but, because they have to. TBTF have their greedy hands in everybody’s pie.

  35. With little success challenging foreclosures how in the world will you or anyone be successful challenging student loan debt

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